Construction Spending Jumps 2.7 Percent in April

Construction activity surged in April by the largest amount in nearly a decade. The unexpected gains could mean the hardest-hit sector of the economy is starting to recover.

Construction shot up 2.7 percent last month compared to March, the Commerce Department said Tuesday. It was the biggest one-month improvement since August 2000.

Housing construction jumped by 4.4 percent to a seasonally adjusted annual rate of $263 billion. Home construction has been helped by home buyer tax credits that expired at the end of April. Economists are concerned about the durability of the housing recovery now that the tax credits have expired.

Nonresidential construction rose 1.7 percent in April to an annual rate of $302.7 billion. That marked the first advance in this category since March 2009. The strength in April came from gains in private sector work on communications projects and power generation facilities. Construction of office buildings and the category that includes shopping centers fell in April.

Commercial building projects have suffered as the weak economy has resulted in rising loan defaults and banks have tightened up on lending standards. That has made it harder for developers to get financing.

In another sign of strength, the government revised the March performance to show a gain of 0.4 percent, double the 0.2 percent increase initially reported.

Government spending rose 2.4 percent in April to $303.3 billion. State and local spending increased 2.3 percent and federal spending rose 2.9 percent. This category is being helped by the government's economic stimulus program but those projects are starting to wind down.

Weakness in construction has been a major drag on the economy as it tries to mount a sustained recovery from the deepest recession since the 1930s.